Reply #5: Fannie and Freddie aren't blameless, but they were hardly [View All]

central players. The hedge funsds, shadow banks who leveraged only a part of the $13 trillion mortgage market to at over $160 trillion of complex mortgage securities, off the books of the regulated banks, hidden from public view until they spun apart, leaving pension funds, cities, states, and countries floudering.

With the help of foreign investments, a Federal Reserve who left interest rates too low for too long and an ineffective response when they finally did decide to act, thousands of mortage brokers jumped on the bandwagon, so much so that the investment banks, (with the help of $40 million dollars in lobbying money from Goldman Sachs) got Glass-Steagal overturned AFTER the merger of what became CitiGroup, and the floodgates opened.

While I realize that for most it is easier to blame Fannie and Freddie, if other lenders had been interested in making home ownership available to people of color there wouldn't have been a need for them to grow as they did. But redlining and other practices required that people find a source that could at least give them a chance. They sold loans into a market that was not defined by them but in which they had to operate. They were hardly the ones who set national policy, who set up the hedge funds whose reckless behavior would be far and away the largest single source of problems in our latest financial crisis, who brought in foreign investments seeking high interest rates in such quantities that it limited the ability of our government to slow the economy down with interest rates. They didn't set the tone for a housing boom that would mask the lack of job creation and the continued destruction of our manufacturing sector for the past 30 years.

And they didn't write the as yet unknown total of worthless paper taken in by the Federal Reserve, estimated to be in the tens of trillions, for which the Federal Reserve paid 100 cents on the dollar with Treasuries backed by the full faith and credit of the United States, turning that money over to banks tp be loaned out, which was instead used to pay billions in bonuses to the same hedge funds that caused (and continue to cause) and not loaned out at all, further costing American taxpayers their hard-earned money to try and prop up a failing economomy.

No, it wasn't Fannie and Freddie.